World Gold Council bullish on demand, ETFs role
The World Gold Council is confident that 2014 would end on a healthy note in global gold demand, and says that instead of a short-term safe haven, the precious metal can benefit investors throughout cycles.
In the latest edition of its Gold Investor report, the industry body says gold has become a portfolio diversifier and a cost-effective hedge to stocks, and is likely to see demand rise as economic growth lifts consumers’ incomes.
Looking at the past decade, which has seen a proliferation of gold Exchange Traded Funds, the council believes those instruments have played a key role. “[They] “have reduced total cost of ownership, increased efficiencies, provided liquidity and access, and brought new interest – and demand – into gold as a strategic investment.”
Not surprisingly the organization insists the commodity has proven to be resilient, “rebalancing to reflect the economic environment."
The paper also notes that economic expansion is a boon for technological and healthcare innovations that use gold components, such as advanced digital devices or medical treatments. Both technology and jewellery related demand and global economic growth, for every 1% of additional gross domestic product (GDP), technology and jewellery demand rise by 5%.
While gold demand has become subdued in India due to domestic investors favouring equity markets, the council expects a noticeable recovery in the last quarter of the year.
In an interview with local news agency PTI, the WGC Director Jewellery, Vipin Sharma, acknowledges the year's first-half was challenging. However, he thinks it was a short-term trend.
"In the long run, we see that the fundamentals are very strong. Now that the festive season is starting and the wedding season setting in, we are looking at a demand figure in the region of 850 tonnes to 950 tonnes.
"We see a very solid and robust trend as far as long term demand and that of the year-as-a-whole is concerned. We are quite positive in terms of what to anticipate for the last quarter particularly," Sharma was quoted as saying.
Long the top importer of gold, India fell behind China in 2013. Overall gold demand in India slid 26% during the first three months of 2014.